Economic scenario may get worse before it gets better: AM Naik, L&T

In an interview with ET Now, AM Naik, CMD, L&T, gives his views on the current economic scenario and the possible growth enablers. Excerpts:

ET Now: How do you think the economy is performing right now?

AM Naik: The manufacturing sector is definitely one of the worst-affected sectors. You started with 11-12% growth and it is now hovering around 1-1.5%. So obviously, this is a matter of great concern. The infrastructure sector has also slowed down considerably, and there is a great need to put new projects in the pipeline. Whatever is happening now is what was planned 4 to 5 years ago. You need to monitor what is happening on these projects more rigorously.

ET Now: Is the scenario looking a lot worse than what it did about 6 months ago?

AM Naik: I feel that the situation might get somewhat worse, before it starts getting better. I feel it will be somewhere around 6% to 6.5%, before it will move up again.

ET Now: Could it drop even below 6%?

AM Naik: For the time being, I do not see that happening. Let us be a little positive.

ET Now: Let us talk about possible growth enablers -- everybody was expecting that there will be some push as far as the monetary policy is concerned. Industry has been clambering for a cut in key policy rates for a while now and that is clearly not happening. How much of a disappointment is that for you?

AM Naik: It has been a bit disappointing for everybody, but one must also understand the limitations. If your inflation rate is moving more than 5-5.5%, you are not leaving too much for the Reserve Bank to act upon. Any significant cut could fuel more inflation. So it is basically about what you give priority.

ET Now: Are you saying that it is unfair to blame the RBI or the monetary policy for the state of the economy? Is that a fair assessment?

AM Naik: Well, the RBI could also put more liquidity in the market.

ET Now: So a CRR cut could have been helped?

AM Naik: Yes.

ET Now: You run a company which feels the pinch when policy decisions are not taken. Has the situation worsened over the last 6 months to 2 years or do you think that now it is beginning to improve a little bit... that some decisions are actually being taken on the ground?

AM Naik: At this point, it is unfair to say that it is improving a bit because we have many political events -- the Presidential elections, the Vice Presidential elections etc -- which have created a lot of diversion from the governance. Right now it is very challenging for us to see what the impact will be in the near term. As for the results in the medium term, that is anybody's guess.